IT Contractor Mortgage

IT Contractor Mortgage – a guide 

Are there specific mortgages for IT Contractors?

Many of those working in the IT industry, do so as Contractors, so it’s reasonable to think that there might be a specific product you should apply for. The truth is, mortgages on the whole are not career-specific products and therefore, you have the option to choose many of the same mortgage market products that are available to everyone else.

What you would benefit from is a Contractor specialist lender, as not all lenders are open to applications from Contractors, regardless of the fact that many are highly paid roles, particularly if you work in the IT sector. This is mainly because the way that contract workers are employed and paid makes calculating the loan less straightforward than it is for PAYE earners, for example. 

The good news is, there are a wide range of specialist Mortgage Lenders who are more than happy to accommodate Contractor income, whether you work as a Sole Trader, Limited Company or under an Umbrella Company; we can help you to access them.

How will my income be assessed?

As Contractors are paid in a variety of ways, the income assessment will vary. Your credit score will also be an important factor.

Self-Employed Sole Trader or Limited Company Director

Usually your accounting history will be used to determine an average income over the past couple of years.

If contracting as a Limited Company, some lenders will consider your total net profits, which can increase your loan amount.

Day Rate Contractor

Some lenders will treat you as employed by using an annualised version of your day rate.

Umbrella Company Contractor

If you work in IT within the public sector, it’s likely you utilise an Umbrella Company to handle your pay. Lenders will treat your income as PAYE, so your annual income will be determined from your payslip figures. It’s important to note that, if you work on a statutory daily rate, your bonus payments will only be included if they appear on your payslip.

How do I Prove My Income/What Documents Will I Need?

When you apply for a mortgage, you will need to provide proof of income relevant to your trading type. All lenders will have different criteria, however, and you may also be asked for  proof of a background or qualification in your industry, particularly if you are new to working as a Contractor.

Self-Employed Sole Trader or Limited Company Director

Your certified accounts, tax calculations and HMRC tax year overviews will be required as proof of income. Different lenders will request a different duration of accounting history, with one to three years being typical.

Day rate Contractor

You will need to provide evidence of your contract rate, and proof that your contract has at least six months left, although the duration will vary by lender.

Umbrella Company Contractor

Three to six months of payslips are usually required, as well as bank statements for the same period.

How Much Can I Borrow as a Contractor?

Your loan amount will be based upon your affordability and credit score, regardless of your employment type. A multiple of your annual income, usually ranging between three and five, will be used to determine how much you can borrow. If you are a high earner, it’s possible that some lenders will extend their borrowing to as much as six times your annual income.

When considering the multiple, lenders will use both your credit score and the stability of your income. These factors will also influence your mortgage rates, so the better your credit score and more established you are within your current role, the more likely you are to secure a mortgage with a larger loan and/or more competitive rates.

How Can a Mortgage Broker Help?

The application process for IT Contractors can be slightly more complex than for other applicants. As there are a number of different methods of income that you may have, it’s important that the lender you approach is best placed to work with yours.

As specialist brokers, here, at Mortgage Marketplace, we can ensure that your mortgage application goes to the type of lender who will be able to assess your income to achieve the maximum borrowing potential. Having access to a substantial pool of independent lenders, we can find a competitive mortgage deal that suits your individual trading style.